Consumer Reports on Retirement
Consumer Reports recently surveyed 24,270 online subscribers over age 55 about their finances and satisfaction with their lives. Among the key findings were that satisfaction came more from good health, planning ahead, maximizing savings, having hobbies and friends, and having a income that that they could not outlive than from big salaries or high living.
To take advantage of these findings, you should make some lifestyle choices and take advantage of automation step available to you at your credit union.
Live Within Your Means
On the lifestyle front, the first and most important habit is to live within your means. Be very careful what you use debt for, and then pay as little for it as possible. Credit unions offer very competitive rates, and often rank among the best of choices in a given locality. Although sometimes difficult at first to develop and stick to, creating a budget is an essential step towards gaining control of the monthly outflow of your money. Make sure that you not only include monthly necessities, but long term goals such as retirement, major vacation, car replacements, and college savings. Over time, as it becomes a habit, you find that the budget actually give you structure and a degree of freedom, because you know that you are taking care of your needs today, and taking prudent steps to be ready for the tomorrows to come.
Start Saving Early
The second habit is to start saving as early as you can. Those who are able to start in their 20’s or early 30’s will typically only have to save 50% – 60% of what those who start later in order to achieve the same results. Or they will find they have saved 70% – 100% more than those who started later if they put in the same amount. Time, compound interest, and prudent investing are what make the difference. Don’t try to find a home run, instead seek to make investments which never lose money and return between 5% – 10%. Your credit union has advisers who can help you find these solutions. They also have payroll deduction and automatic account withdrawals that can be set up to make sure these goals get funded.
Save For Important Life Events
As your family grows, you face the triple challenge of making ends meet, saving for retirement, and saving for each of your kids college education. It is vital that you make funding your retirement a priority during this period. In a worst case scenario, you can borrow money to pay for college, but you cannot borrow money to pay for your retirement. Credit unions have multiple options to invest for retirement, as well as ways to save for your children’s college. Some of these even cap how much you will have to pay for tuition at certain schools. Aside from saving money, make sure to teach your children the value of money from an early age by paying them an allowance, and then allocating certain items they must purchase for themselves. A good grounding in this area will pay huge dividends when they head off to college and are able to spend their loans, grants, and scholarship wisely and prudently. Also diversify your holdings. The Consumer Reports survey indicated that those who had seven or more types of investments had an average net worth of $1.4 million while those with fewer had an average net worth of only $678,000.
Finally, pay off your debts, especially your home mortgage, by the time you retire. Yes, you might get a better return in the marketplace, but if the market moves against you and you haven’t paid off your mortgage, you may find yourself with a smaller nest egg and years of mortgage payments ahead of you. The Consumer Reports survey also backed up this idea as they found a strong connection between satisfaction in retirement and the lack of any significant debt. Take a few minutes and figure out how much you need to live on if all your debts – including student loans, credit cards, cars, and your home – are gone. You will likely be pleasantly surprised to see how much smaller that number is that what you are currently spending. This raises the likelihood of having enough saved for all your retirement, as well as the peace of mind that comes from knowing you have a place to live. Again, borrow from your credit union to get lower rates, and then set up automatic payment plans that will make sure you are paid off according to your retirement timeline.